Understanding Financial Reports and Notes to the Financial Statements - Individual Report Part A PDF

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This assignment is a part of assignment 3. You are required to select two companies from two different industries and complete the following two tasks using their most recent annual reports. My score on this assignment is 18/20. I lost score on income statement and cash flow statement. ...

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Accounting in Organisation & Society Financial Report – Part A Lecturer: Clara Nkhoma Student’s name: Nguyen Huu Dat Student’s ID: s3678378 Course code: ACCT2105

Nguyen Huu Dat – s3678378

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Accounting in Organisation & Society

Contents Task I: Understanding financial statements’ items..........................................................................2 Task II: Understanding financial statements’ items in detail...........................................................4 1.

The principal activities.........................................................................................................4

2.

Revenue................................................................................................................................4

3.

Property, plant and equipment..............................................................................................4

4.

Auditor..................................................................................................................................4

5.

The Board of Directors.........................................................................................................5

6.

Earnings per Share (EPS).....................................................................................................5

References........................................................................................................................................6

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Accounting in Organisation & Society

Task I: Understanding financial statements’ items Comparison between Daimler Group and Santos’s Financial Statements.

Daimler Group

Income Statement

Santos

- More details for revenue, income

- Less details for revenue, income

and expenses.

and expenses.

- Income taxes

- Income benefit.

 Because Daimler is a group of companies, it has more subsidiaries operating in different fields rather than Santos which is only an energy company does. Therefore, Daimler’s managers must classify more detailed sections.  Because Daimler gained profit before income taxes, while Santos made a loss before taxes. - Have intangible assets.

- Do not have intangible assets.

- Mention liabilities after equity.

- Introduce liabilities before equity.

Balance Sheet

 Daimler owns famous brand cars such as Mercedes-Benz, while Santos does not have any familiar products due to operating in energy industry.  Due to difference in accounting standards in two different countries, one in Germany, the other is Australia, it leads to different orders. - Acquisition of an automobile company and marketable debt

Statement of Cash flows

- Acquisition of oil and gas assets.

securities.

- Complicated financial activities.

- Simple financial services.

 Because Daimler works in automobile industry and financial service, it have more activities in these industries, whereas, Santos is only

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Accounting in Organisation & Society expanded by purchasing energy assets.

Statement of changes in

- No events were recorded in

- Share issued helped to raise

share capital activities.

capital.

- Do not have any losses.

- Accumulated losses.

Equity

 While Santos presented the loss attributable to shareholders, Daimler showed the profit, leading to retained earnings during the period as reported in the income statement. Besides, Santos’s managers wanted to raise total equity by issuing share capital, so it happened these events.

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Accounting in Organisation & Society

Task II: Understanding financial statements’ items in detail 1. The principal activities There are two major fields in Daimler; one is in automobile field manufacturing premium and commercial cars, and the other Daimler Financial Services.

2. Revenue According to the statement of accounting policies in Daimler’s report, revenue from sale is recognized if the risks and benefits of ownership are transferred to customers (Daimler Annual Report 2017, p. 247). The number that deals with revenue is 4.

3. Property, plant and equipment Based on Daimler’s report, it can be seen clearly that the company valued their assets by acquisition or manufacturing costs less accumulated depreciation. Besides, when accumulated impairment losses happened, it would be also recognized (Daimler Annual Report 2017, p. 249). Furthermore, useful lives of property, plant and equipment presented below by the company: - Buildings: 10 to 50 years - Technical equipment and machinery: 6 to 25 years - Other equipment and factory: 3 to 30 years. The number that deals with property, plant and equipment is 11.

4. Auditor The auditor who took responsible for the report is KPMG (Klynveld Peat Marwick Goerdeler). Auditors must become independent because it makes sure auditors to give a reliable professional view on the financial reports for external stakeholders’ purposes. The financial statements must be audited by an external party because financial statements might be prepared by internal auditors in the company, but external stakeholders may not know whether true or not. Therefore, SEC requires public companies to have their financial reports audited by external auditors even their reports are believed to be reliable, so it provides to stakeholders an assurance.

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Accounting in Organisation & Society 5. The Board of Directors The Chairman of the Board of Directors is Dieter Zetsche. The Boards of Directors are in the highest position in the company, and they must perform their tasks as defined by the law, manage the risks and plan sale strategy for the company and report organization’s status (Daimler 2017, p. 64).

6. Earnings per Share (EPS) According to NASDAQ, the ratio EPS illustrates the amount of money that companies make in profits per outstanding stocks. Also, EPS is calculated by the following formula: EPS ratio =

Net income−Preferred dividend Weighted average number of shares outstanding

(AccountingForManagement)

In Daimler’s 2017 annual report, there is a considerable increasing in the amount of basic EPS from 2016 to 2017, 7.97 and 9.84 respectively, almost 26%. By comparison, while there was no change in the number of outstanding shares after a year, net income actually increased, leading to increase in the amount of EPS. Overall, Daimler had done business well in 2017.

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Accounting in Organisation & Society

References - NASDAQ n.d, ‘Earnings per Share – The NASDAQ Dozen’, NASDAQ, viewed 25 April 2018, . - AccountingForManagement n.d, ‘Earnings per share (EPS) ratio’, AccountingForManagement, viewed 25 April 2018, . - United States of America Securities and Exchange Commission 2002, ‘All About Auditors: What Investors Need to Know’, SEC, viewed 25 April 2018, . - Daimler 2017, Annual Report 2017, company report, Daimler Group, viewed 23 April 2018,

< https://www.daimler.com/documents/investors/reports/annual-report/daimler/daimler-irannual-report-2017.pdf>. - Santos 2017, Annual Report 2017, company report, Santos, viewed 23 April 2018, < https://www.santos.com/media/4319/2017-annual-report.pdf>.

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